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February 27, 2014

Be Aware of the Impact of Fund Fees

Are excessive financial fees eating your returns? “Many investors are simply unaware of how much
they are paying in fees. Morgan Housel notes how one friend wasn't aware that a
1.5% annual fee equated to a massive expense.” "Over Christmas,
a family friend asked me to take a look at her finances. She's in her 60s,
worked hard her whole life, and accumulated a couple of million dollars to
retire on. She's had a financial adviser at one of the nation's largest banks
for the past five years. I met him once; he's a nice guy. Smart, able, honest,
and competent, he put my friend in a basket of investments -- mostly low-cost
index funds, a few individual stocks, and a portfolio of bonds -- keeping her
on track to enjoy a comfortable retirement.She's happy with her adviser. For
the most part, I was, too. There's just one problem: He charges an incredible
1.5% of assets as his annual fee. I tried to explain to my friend how high this
was, but my comments were met with a shoulder shrug. One and a half percent
didn't sound like much to her.” BUT… “It was literally the single largest line item on her budget. More
than her mortgage, more than her food bill, more than she spent on travel,
clothes, entertainment, gifts, medical care, cars, and tuition for her
kids."USA Today (2/24)
What are you paying in investment
fees? http://www.usatoday.com/story/money/personalfinance/2014/02/24/where-are-the-customers-yachts/5785353/